Correlation Between Cincinnati Financial and Webster Financial
Can any of the company-specific risk be diversified away by investing in both Cincinnati Financial and Webster Financial at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Cincinnati Financial and Webster Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cincinnati Financial Corp and Webster Financial, you can compare the effects of market volatilities on Cincinnati Financial and Webster Financial and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Cincinnati Financial with a short position of Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cincinnati Financial and Webster Financial.
Diversification Opportunities for Cincinnati Financial and Webster Financial
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Cincinnati and Webster is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Cincinnati Financial Corp and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial and Cincinnati Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Cincinnati Financial Corp are associated (or correlated) with Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of Cincinnati Financial i.e., Cincinnati Financial and Webster Financial go up and down completely randomly.
Pair Corralation between Cincinnati Financial and Webster Financial
Assuming the 90 days trading horizon Cincinnati Financial Corp is expected to under-perform the Webster Financial. But the stock apears to be less risky and, when comparing its historical volatility, Cincinnati Financial Corp is 1.35 times less risky than Webster Financial. The stock trades about -0.24 of its potential returns per unit of risk. The Webster Financial is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest 5,600 in Webster Financial on October 12, 2024 and sell it today you would lose (250.00) from holding Webster Financial or give up 4.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cincinnati Financial Corp vs. Webster Financial
Performance |
| Timeline |
| Cincinnati Financial Corp |
| Webster Financial |
Cincinnati Financial and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cincinnati Financial and Webster Financial
The main advantage of trading using opposite Cincinnati Financial and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cincinnati Financial position performs unexpectedly, Webster Financial can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Webster Financial will offset losses from the drop in Webster Financial's long position.| Cincinnati Financial vs. COMPUTERSHARE | Cincinnati Financial vs. Rocket Internet SE | Cincinnati Financial vs. Entravision Communications | Cincinnati Financial vs. Grand Canyon Education |
| Webster Financial vs. Sunstone Hotel Investors | Webster Financial vs. Cleanaway Waste Management | Webster Financial vs. Coor Service Management | Webster Financial vs. Wyndham Hotels Resorts |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.
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